HMV to close 60 stores as snow hits sales

High street music chain HMV is to close 60 stores over the coming year as the
company issued a profits warning that said snow troubles ‘significantly
undermined’ trade.

By Szu Ping Chan

9:34AM GMT 05 Jan 2011

HMV Group, which also owns Waterstone's, said like-for-like sales for the 10 weeks to January 1 fell 10.8pc, with sales for the crucial five week Christmas period to January 1 down 10pc on last year, hindered by a 13.6pc slump at its HMV music stores.

HMV Group

The disappointing figures promped HMV to say full-year profits would now be around the lower end of forecasts, and warned that meeting the terms of its lending agreements would be “tight" after snowy weather hit Christmas trade.

HMV shares, which have already lost more than two-thirds of their value over the past year, slumped another 22pc to 25.5p following the news.

The chain, which has been battling for years with competition from supermarkets and online giants such as Amazon and Play.com, said in a statement on Wednesday that they were now "taking aggressive action as we continue to tightly manage our cost base."

Simon Fox, chief executive, added: "Whilst HMV has had a challenging year to date, it remains a profitable and cash-generative business and a powerful entertainment brand.

"The pace of change in the markets in which we operate underlines the urgency with which we must continue to transform this business."

Even HMV’s silver lining brought news of decline, with Waterstone’s, the group's book arm suffering a 0.4pc decline in sales in the five weeks to January 1.

However, analysts were much less upbeat, with some questioning HMV's future in its current form.

In a note to investors, Investec said: "The core UK HMV division remains under considerable stress as a format and this must raise questions over its long-term future. This has been evident for some time, but today's update highlights a lack of improvement in like-for-like sales despite easier comparatives and new product initiatives.

"The market could debate whether a break-up or further buying from Russia entrepreneur Alexander Mamut (who increased his stake in HMV to 5pc in December), might provide some support."